When the tax credits expire Dec. 31, small solar power installation companies could be hit the hardest because they depend on new business in their local markets. But even large companies are scrambling to finish as many projects as they can this year.
Â“EverybodyÂ’s making contingency plans,Â” said Steve Kircher, chief executive officer of Solar Power Inc. in Roseville. Â“I think youÂ’re going to see cutbacks and layoffs in the construction industry. WeÂ’re not out soliciting new business.Â”
Â“It looks like for 2008 we have a very strong pipeline,Â” said Heather Dowling, a market intelligence analyst in the Sacramento headquarters of SunTechnics Energy Systems Inc., a subsidiary of Conergy AG of Germany.
But for 2009, she said, Â“customers are sticking in the negotiation processÂ” rather than signing a contract.
Conergy plans to merge SunTechnics into Conergy by the end of the year. It laid off some of the Sacramento staff in March, and the local office has started operating under the Conergy name.
The federal tax credits cover 30 percent of the cost of buying equipment and installing solar power systems for businesses, and up to $2,000 for a residential system, which typically costs $8 to $10 per watt.
Debate over how to pay for the credits has stymied efforts to pass an eight-year extension. House Resolution 6049, which pairs the tax credit with tougher accounting rules for multinational corporations, passed the House of Representatives on May 21 but has stalled in the Senate. The bill has 52 of the 60 votes needed to block a filibuster.
The Congressional stalemate has stunned solar industry advocates.
Â“WeÂ’re horrified,Â” said Sue Kateley, executive director of the California Solar Energy Industries Association. Â“IÂ’ve stopped betting on it.Â”
But some industry executives are counting on the extension.
Â“We believe Congress will do the right thing and extend the tax credit,Â” said Phil Rettger, executive vice president of Hayward-based OptiSolar Inc., which is building a solar-panel manufacturing plant in McClellan Park. Â“ThereÂ’s a history of waiting until the last minute and then extending the tax credit.Â”
Last year, Congress passed an energy bill that included a one-year extension of a wind power tax credit on Dec. 18, less than two weeks before it was set to expire.
The Sacramento Municipal Utility District isnÂ’t taking any chances with a one-megawatt, ground-mounted solar panel array under construction in Wilton.
Â“It will be completed by the end of the year,Â” said Jon Bertolino, SMUDÂ’s superintendent of renewable generation. Â“When we were picking vendors, we were very clear it was necessary to get it done before the end of the year.Â”
SMUD has contracted with Escondido-based enXco Inc., a subsidiary of the French renewable power business EDF Energies Nouvelles Co., to build, own and operate the power plant. SMUD will buy the power produced over 20 years. EnXco expects to finish the project this month.
SMUD offers rebates of $2.50 per watt for customers who install solar power systems, and has projects in line to receive the cash. Expiration of the solar tax credit would probably dry up the utilityÂ’s reservation list, Bertolino said.
If Congress doesnÂ’t extend the tax credit, large companies will probably focus their resources in other countries. Solar Power, which manufactures solar panels in China and installs them in the United States, would concentrate on selling panels in other parts of the world, Kircher said.
Last month, the Roseville company signed a $20 million contract to sell panels to a South Korean distributor and installer. The company would probably try to make more deals like that, Kircher said.
OptiSolar plans to build a 550-megawatt photovoltaic project, the largest in the world, in San Luis Obispo County. That project is dependent on the federal tax credit. But the company also plans to start the first stage of its planned 220 megawatts of solar power farms in Canada within a month. Incentives from the government of Ontario will make the project pay off.
The California Solar Energy Industries Association has placed its bets on a different market stimulus plan. The association supports a state bill, Senate Bill 1714, that would require Â“feed-in tariffsÂ” for small solar projects. People who build solar power systems would be able to sell their excess power to utilities.
The three largest state-regulated utilities, including Pacific Gas and Electric Co., already contract for power from large solar projects. Residential and small commercial customers receive credits for solar power generation on their bills, but they do not receive payments if they generate more electricity than they use.
SB 1714 passed the state Senate on May 29 and is sitting in the Assembly Utilities and Commerce Committee.